Coverdell, 529, Roth: Which to tap first for college?

  @Money June 26, 2013: 4:04 PM ET
Boost your financial aid offer
NEW YORK (Money Magazine)

I have mutual funds, a Coverdell, a 529, and a Roth. Which do I use first for my son's college? -- P. Hazen, Wilmington, Del.

Take into account taxes and, if you qualify, need-based aid, says Troy Onink, CEO of Stratagee.com, a college-planning firm.

Start with the 529 and Coverdell Education Savings Account: Withdrawals for eligible expenses, such as tuition and books, aren't taxed or counted as income in financial-aid calculations.

You might also tap the mutual funds to get the American Opportunity Tax Credit, worth as much as $2,500 annually. You'll have to spend up to $4,000 from sources other than the 529 or ESA; the income phaseout is $180,000 for couples and $90,000 for singles.

Related: Getting the financial aid you need

Save the Roth for last (using it only if you're already set for retirement). You can withdraw contributions tax-free; earnings used for school are taxed as income. To top of page

Got a question for Ask the Expert? Send it to AskTheExpert@moneymail.com.


Join the Conversation
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.36%4.24%
15 yr fixed3.39%3.26%
5/1 ARM3.36%3.27%
30 yr refi4.34%4.22%
15 yr refi3.38%3.24%
View rates in your area
 
Find personalized rates:
Rate data provided
by Bankrate.com
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.